Budget 2013: Implementation key; overweight on DLF says HSBC India

Jitendra Sriram, MD & head of research, HSBC India explains that there has been an increase in interest on the government grappling with the process of announcing and implementation of reform initiatives. While the RBI continues to face stress, Sriram highlights that land acquisition and local approvals continue to remain road-blocks.

Jitendra Sriram, MD & head of research, HSBC India explains that there has been an increase in interest on the government grappling with the process of announcing and implementation of reform initiatives. While the RBI continues to face stress, Sriram highlights that land acquisition and local approvals continue to remain road-blocks.

Jitendra Sriram, MD & head of research, HSBC India explains that there has been an increase in interest on the government grappling with the process of announcing and implementation of reform initiatives. While the RBI continues to face stress, Sriram highlights that land acquisition, state pollution norms and local approvals continue to remain road blocks for various projects.

Sriram reveals that he is 'overweight' on DLF in the real estate sector and points out that the fundamentals of telecom show possibilities of improvement. "I expect that the current account deficit (CAD) to peak out and improve going ahead. Realistic pricing on PSU issues to be attractive for investors and the current levels of fiscal deficit are clearly not sustainable," says Sriram on CNBC-TV18. "India clearly remains in focus for investment opportunities by international companies."

The senior analyst estimates that the lower raising of capital by ICICI Bank in the long run is a positive and has a constructive outlook on the stock whose results were in line with expectations.

Below is an edited transcript of the analysis on CNBC-TV18

Q: How do you expect the market to move? Flows have been very strong and supply of paper has started to pick-up once again. Do you expect the market to continue to remain range-bound despite such strong liquidity?

A: In 2012, clearly India accounted for 50 percent of inflow to Asia excepting Japan. And in January so far India garnered close to 80 percent of inflow to Asia excepting Japan. Clearly, a lot of investors are enthused about the kind or reform initiatives that the government has announced and the focus will be on the successful implementation of the initiatives.

From a rerating perspective, I think the easy part was over last year. I would be cautiously optimistic from hereon. Though there is an expected 10-11 percent upside for the market, the market will find it tough to post an encore of last year's superlative performance.

Q: What are the returns or expectations that the Budget Month offers for the market?

A: I am certain about the pick-up in volatility, because the Budget does make the market quite volatile. Investors are keenly watching and waiting for the steps taken by the government to effect a turnaround in investment. During the 2002-2007 period investments as a proportion of the GDP went up from a shade under 30 percent to somewhere almost nudging the 40-percent mark and from that period investments have slowed down.

It needs to see if the policy initiatives would be able cause investment levels to return to healthy levels where it can start to trigger the uptick in GDP growth. A lot of the industrial, capital goods and other sectors could be in the limelight this month.

Q: What has been the response to your India investor conference? How would you react to the criticism, to your fund-raising exercise, that the long-only funds are no longer interested in India?

A: The traditional India-dedicated funds may not have seen too much of inflows, but that does not mean that the funds are predominantly volatile. There are a lot of global macro-funds now flowing into India through passive sources such as exchange-traded funds (ETFs).

The response is clearly impressive as our conference is one of the first forums of the year offering insights to investors as they try to get a grip on the reform initiatives by the government. Investors are also intrigued ever since investments as a proportion of GDP started coming off and consumption-oriented sectors such as staples and durables posted a huge performance.

So, investors are at the crossroads and want to know the effect of investments starting to get that expected leg-up. They are also keen on positioning themselves into 2013.